Demand for emerging-market debt is increasing as investors
seek alternatives to near-zero benchmark interest rates in
Europe and the U.S. The average yield on bonds sold by
developing countries fell to a record low of 4.59 percent on
Oct. 16, according to data compiled by JPMorgan Chase & Co.

Emerging-market issuers have raised a record $394.4 billion
selling debt abroad this year, compared with $278.2 billion in
all of 2011, according to data compiled by Bloomberg. The Polish
bonds sold yesterday yield 1.35 percentage point more than euro
mid-swaps, down from a spread of 1.43 percentage point when it
sold bonds on Oct. 2.

Slumping Economy

Ukraine’s economy contracted 1.3 percent in the third
quarter from the same period last year as demand for exports
slumped. The central bank’s reserves plunged 8.5 percent last
month to $26.8 billion, the lowest since May 2010, as policy
makers spent to prop up the national currency, the hryvnia.
Ukraine will have to repay more than $1.7 billion in debt coming
due by March, according to Kiev-based Dragon Capital.

Ukrainian dollar-denominated bonds due in 2017 rose,
pushing yields down to 7.353 percent, to the lowest level since
Nov. 8, according to data compiled by Bloomberg. The national
currency, the hryvnia, strengthened to 8.1625 per dollar as of
2:10 p.m. in Kiev.

Yesterday’s sale was the third for Ukraine this year. The
country tapped international debt markets in July, when it sold
$2.6 billion of Eurobonds due 2017 at a yield of 9.25 percent.
It also sold $1 billion of Eurobonds in August maturing in 2014
at a yield of 7.95 percent. It issued 10-year bonds in 2007 to
sell 6.75 percent, according to data compiled by Bloomberg.

Arrangers

JPMorgan (JPM), Morgan Stanley (MS), OAO Sberbank, and VTB Capital
arranged yesterday’s sale, according to people close to the
transaction who asked not be identified because they’re not
allowed to speak publicly on the matter.

S&P rates Ukraine at B+. Both Fitch Ratings and Moody’s
Investors Service classify it one level lower, five steps short
of investment grade.

Bond-buying programs by the Federal Reserve and the
European Central Bank that have suppressed bond yields are also
attracting non-frequent issuers to sell debt abroad. Bolivia,
rated BB- by S&P, sold its first dollar bond abroad since the
1920s on Oct. 22 to yield 4.875 percent. Paraguay is planning
its first international bond sale, according to people familiar
with the matter.

Kenya, Rwanda, Tanzania, Uganda and Mozambique may also
sell their first foreign-currency bonds in the “next few
years,” according to a Moody’s report dated Oct. 3.